The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, August 5, 2011

RBA upgrades core inflation forecasts to 2013 + drops market pricing as expected (table)

Because of its poor underlying inflation-targeting performance, the RBA has been forced to upgrade its core inflation forecast from 3% for 2011 to 3.25% in 2011 (in the space of just 3 months), and has above-target core inflation projected over 2012 and 2013, hitting 3.25% by the end of 2013 (click to enlarge table). Remember the RBA's implied core inflation target is an already-high 2.5% pa.

And since the interest rate markets no longer seem to listen to the RBA (they are pricing in 3 rate cuts), the RBA has had to drop its "market pricing" assumption for the future path of interest rates, instead opting--as I predicted--for unchanged rates. The more honest thing to have done would be to continue to rely on market pricing, and tell us what inflation profile the three rate cuts the market expects would mean for Australia.

This is a case of credibility bleeding away as each day passes.